question archive The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike
The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike
Subject:BusinessPrice: Bought3
The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Total $ 926,000 463,000 463,000 Mountain Dirt Bikes Bikes $ 265,000 $ 407,000 118,000 191,000 147,000 216,000 Racing Bikes $ 254,000 154,000 100,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) 69,700 43,700 114,700 185,200 413,300 $ 49,700 8,700 20,500 40,600 53,000 122,800 $ 24,200 40,600 7,800 38,800 81,400 168,600 $ 47,400 20,400 15,400 35,300 50,800 121,900 $ (21,900) *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. < Prev 4 of 6 Next >
